Gussie & Gussie
[2024] FedCFamC1F 59
•15 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Gussie & Gussie [2024] FedCFamC1F 59
File number(s): CAC 1594 of 2023 Judgment of: ALTOBELLI J Date of judgment: 15 February 2024 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Where proceedings were transferred from the Federal Court of Australia – Where the wife seeks an order pursuant to s 247A of the Corporations Act 2001 (Cth) – Where the wife seeks to rely on documents by “relaxing” the principles in Harman v Secretary of State for the Department [1983] 1 AC 280 – Where the husband seeks for the wife’s solicitor and their law firm to be restrained from representing her due to a conflict of interest – Where the husband seeks for the wife to be restrained from providing information in relation to himself or his business to her legal representatives and their law firm – Where the husband seeks to restrain the wife from disseminating information she receives in the financial disclosure process relating to him or his business – Where the husband seeks further disclosure – Where the Court orders the mother’s legal representatives to cease acting for her – Where the Court makes an order restraining the mother from disseminating information – Where the Court dismisses the s 247A application. Legislation: Corporations Act 2001 (Cth) ss 247A, 1337H
Family Law Act 1975 (Cth)
Federal Court of Australia Act 1976 (Cth) ss 37AF, 37AG, 37 AI
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 6.04(2)(c), Sch 1
Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 r 11.4
Cases cited: Acehill Investments Pty Ltd v Incitec Ltd [2002] SASC 344
Black v. Taylor [1993] 3 N.Z.L.R. 403
Charisteas & Charisteas (2022) FLC 94-109; [2022] FedCFamC1A 160
Durban Roodepoort Deep Ltd v Reilly [2004] WASC 269
Enares Pty Ltd v Nimble Money Ltd (2021) 158 ACSR 451; [2021] FCA 1596
Grimwade v Meagher and Others [1995] 1 VR 446
Hanks v Admiralty Resources NL (2011) 85 ACSR 101; [2011] FCA 891
Harman v Secretary of State for the Home Department [1983] 1 AC 280
Hearne v Street (2008) 235 CLR 125; [2008] HCA 36
Intercapital Holdings Ltd v MEH Ltd (1988) 13 ACLR 595
Kallinicos v Hunt (2005) 64 NSWLR 561; [2005] NSWSC 1181
Kennon v Kennon (1997) FLC 92-757; [1997] FamCA 27
McNeill v Hearing and Balance Centre Pty Ltd [2007] NSWSC 942
Mesa Minerals Ltd v Mighty River International Ltd (2016) 241 FCR 241; [2016] FCAFC 16
Nash v Timbercorp Finance Pty Ltd (2019) 137 ACSR 189; [2019] FCA 957
Praetorin Pty Ltd v TZ Ltd (2009) 76 ACSR 236; [2009] NSWSC 1237
Rasley (Singapore) Pte Ltd v Financial & Energy Exchange Ltd [2020] FCA 1462
Division: Division 1 First Instance Number of paragraphs: 54 Date of hearing: 19 December 2023 Place: Sydney Counsel for the Applicant: Mr Blank Solicitor for the Applicant: Parker Coles Curtis Counsel for the Respondent: Mr Notley Solicitor for the Respondent: C Lawyers Counsel for the interested third party: Mr Hyde Solicitor for the interested third party: Nelson & Hill Lawyers ORDERS
CAC 1594 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR GUSSIE
Applicant
AND: MS GUSSIE
Respondent
B PTY LTD
Interested Third Party
ORDER MADE BY:
ALTOBELLI J
DATE OF ORDER:
15 FEBRUARY 2024
THE COURT ORDERS THAT:
1.C Lawyers be restrained from continuing to act for the Respondent Wife (“the Wife”) in these proceedings.
2.Mr D be restrained from acting for the Wife in these proceedings.
3.The Wife be restrained from providing, or making available to view, any information in relation to B Pty Ltd or the Applicant Husband (“the Husband”) to:
(a)C Lawyers; and
(b)Any person who is employed by C Lawyers.
4.The Wife be restrained from disseminating or communicating to anyone (other than her legal representatives or an agreed mediator or expert valuer) any confidential information that she has received or will receive through the financial disclosure process as it relates to the Husband or B Pty Ltd. This includes but is not limited to copies of any Court documents, documents produced under subpoena or any documents produced by way of disclosure in relation to the family law matter between the Husband and the Wife, including but not limited to any financial documents relating to B Pty Ltd.
5.Within 14 days of the date of these orders the Wife shall file and serve an updated financial statement.
6.Within 14 days of the date of these orders the Wife shall provide to the Husband a list of all documents that she has either provided to C Lawyers (including but not limited to any employee or Director of C Lawyers), or that she has allowed anyone at C Lawyers to see, and an indication in writing of when the documents were provided, or when they were shown to anyone at C Lawyers.
7.Within 28 days of the date of these orders the parties shall exchange any outstanding disclosure documents.
8.In the event that a party notifies chambers of an intention to seek costs arising from this application within 28 days, directions will be made for such a costs application to proceed by way of written submissions.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Gussie & Gussie has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALTOBELLI J:
INTRODUCTION
These reasons for judgment explain why the Court has restrained a firm of solicitors, and a named solicitor, from continuing to act on behalf of the respondent wife (“the wife”) in proceedings in this Court, and why the wife has been restrained from providing, or making available to view, certain types of information. A number of procedural directions are also made.
The Court also explains orders made for the applicant husband (“the husband”) to provide disclosure to the wife, and for the dismissal of the wife’s application under s 274A of the Corporations Act 2001 (Cth) (“the Corporations Act”).
BACKGROUND
The substantive proceedings in this Court between the husband and the wife were commenced on 8 September 2023. The husband’s Amended Initiating Application filed 12 December 2023, rather unhelpfully, seeks an order that the husband be granted leave to file an Amended Initiating Application, indeed a Further Amended Initiating Application, particularising the orders he seeks once full and frank disclosure and mediation have occurred. The wife’s Response to Final Orders filed on 1 November 2023, again unhelpfully, seeks the same order as the husband.
It is only from the rest of the material before the Court, and the submissions made, that the Court can deduce that the substantive issue between the parties is the alteration of property interests. For example, the wife’s affidavit filed in the Federal Court of Australia (“the FCA”) in support of her application under s 247A of the Corporations Act (discussed below), suggests that there is a significant issue about the valuation of the husband’s business. Indeed, it seems that he contends that it has a low or negligible value whereas the wife contends that it has a significant value. The wife contends that the business is insolvent. What evidence is before the Court suggests that it is a business with a focus or speciality in a particular field, and carries substantial work in progress which may, may not, or may only in part be realised as billable income. The disclosure issues arising in this case seem to revolve around this valuation issue.
The same affidavit of the wife also foreshadows that family violence may be an issue in the family law proceedings. The affidavit of the wife filed in support of her Originating Process under s 247A of the Corporations Act contains quite detailed evidence about the violence. It seems clear that the husband was charged and convicted arising out of an assault and that an interim apprehended domestic violence order was made protecting the wife in mid-2021. The family violence is contended, in the said affidavit, to constitute oppressive conduct. Typically, where family violence is alleged in the context of proceedings for alteration of property interests, the alleged victim of violence contends that their contribution has been rendered more arduous, and that this should be recognised by a greater adjustment in their favour: Kennon v Kennon (1997) FLC 92-757.
The parties appear to have resolved parenting issues under the law of State E in the United States of America (“USA”), where the wife and their children live.
The wife commenced proceedings in the Federal Court of Australia in mid-2023 against B Pty Ltd. It is important to recognise that there had been correspondence between all relevant parties, including the wife’s current lawyer, about the family law issues between the parties (see Annexure MSG10 of the wife’s affidavit filed in the FCA). Indeed, the husband commenced proceedings in Division 2 of this Court on 8 September 2023, shortly after the wife commenced her proceedings. The significance of this will be discussed below. Her Originating Process filed on that date sought orders under s 247A of the Corporations Act together with an ancillary order, and an order releasing her from her obligations arising under the Harman principle: see Harman v Secretary of State for the Home Department [1983] 1 AC 280 (“Harman”). The latter is also noteworthy. Both the wife, and her solicitors, were well aware of their Harman obligations at the time of the commencement of the FCA proceedings.
In late 2023 orders were made by Cheeseman J in the FCA listing B Pty Ltd’s Interlocutory Application for hearing two days later. In its Interlocutory Application, B Pty Ltd sought orders under s 1337H of the Corporations Act for the proceedings to be transferred to the Federal Circuit and Family Court of Australia (“FCFCOA”), for a non-publication order under s 37AF of the Federal Court of Australia Act 1976 (Cth) (“the FCA Act”) in relation to the wife’s Originating Process and affidavit filed in mid-2023 until the Interlocutory Application is determined, and costs. At the hearing, orders were made by Cheeseman J transferring the proceedings to the FCFCOA pursuant to s 1337H(2) of the Corporations Act and making a non-publication order under ss 37AF, 37AG and 37AI of the FCA Act.
This matter was transferred to Division 1 of the FCFCOA on 3 November 2023 and came before a Judicial Registrar in the FCFCOA on 22 November 2023. The Judicial Registrar listed the matter for interim hearing before me on 19 December 2023, made an order that the parties are entitled to rely upon their affidavit material filed in the FCA proceedings for the interim hearing, and made a notation that the material filed in the FCA proceedings will be admitted into evidence in the FCFCOA proceedings, which is likely to be relied upon for the purpose of the interim hearing.
The matter came before me for interim hearing on 19 December 2023. The husband and the wife were both represented by counsel. An interested third party, B Pty Ltd (who are the respondent in the civil proceedings) also participated and made submissions at the interim hearing through counsel.
The husband is 39 years old and is a professional and Director of B Pty Ltd in City F. The wife is 37 years old and is a public servant for the New South Wales government but currently resides in State E, USA. The wife holds 50 per cent of the shares in B Pty Ltd. The parties commenced their relationship in approximately 2007, commenced cohabitation in 2008, married in 2008 and separated on a final basis on 17 May 2022. The parties’ divorce has not yet been finalised, but the husband states in his affidavit that a proposed divorce decree is awaiting final order in the State E court. There are three children (“the children”) of the marriage aged 7, 8 and 12, who all live with the wife in State E, USA. The parties entered into a “Mediation Settlement Agreement” on June 2023 providing for the children to live with the wife in State E, USA, with the husband being permitted to visit at various times throughout the year.
The current proceedings relate to property matters only.
APPLICABLE LAW
There are generally two bases upon which a practitioner may be restrained from acting, and they are to protect a party’s confidential information or because the administration of justice requires it.
In Nash v Timbercorp Finance Pty Ltd (2019) 137 ACSR 189 at [66], Anderson J stated that the precise identification of the confidential information is central to the subsequent characterisation of its potential misuse, and quoted Le Miere J in Durban Roodepoort Deep Ltd v Reilly [2004] WASC 269 at [80]:
Before a court will grant an injunction to protect a client’s confidential information by restraining his former solicitor from acting against him, the former client must establish that the solicitor possesses confidential information and must identify the confidential information with precision and not merely in global terms. The client must identify the confidential information with some particularity. The degree of particularity required must depend upon the facts of the particular case. The confidential information must be identified with sufficient particularity to enable the court to determine whether the information is truly confidential, whether the confidential information which once existed, if it did, continues to be confidential and whether the confidential information is relevant to any issue in the current proceedings and might be used in those proceedings.
While counsel for the wife relied on Grimwade v Meagher and Others [1995] 1 VR 446 (“Grimwade”), this Court prefers the decision made by the Full Court in Charisteas & Charisteas (2022) FLC 94-109 (“Charisteas”) at [36]– [39] which set out the following relevant principles:
36Regrettably, it appears that the primary judge was led into error by the parties in these proceedings, who contended that the relevant principle to be applied in determining whether a legal practitioner should be prevented from acting for a party, in the interests of the protection of the integrity of the judicial process, is the principle set out above.
37The correct test that should have been applied by the primary judge, in determining whether a legal practitioner should be restrained from acting on behalf of a party, is that which is adumbrated by the Full Court of the Federal Court of Australia (Besanko, Lee and Abraham JJ) in Porter v Dyer (2022) 402 ALR 659 who applied, with approval, the following statement of principle by Griffiths J in Mumbin v Northern Territory of Australia (No 1) [2020] FCA 475:
39.The relevant principles which guide the exercise of the Court’s separate discretion are broadly as follows:
(a)The Court has an inherent jurisdiction to ensure the due administration of justice, to protect the integrity of the judicial process and to restrain legal practitioners from acting in a particular case as part of its supervisory jurisdiction (see, for example, Grimwade v Meagher [1995] 1 VR 446 at 452 per Mandie J and Dealer Support Services Pty Ltd v Motor Trades Association of Australia Ltd [2014] FCA 1065; 228 FCR 252 at [37] per Beach J).
(b)The test to be applied is whether a fair-minded, reasonably informed member of the public might conclude that the proper administration of justice requires that a solicitor be prevented from acting in the interests of the protection of the integrity of the judicial process and the appearance of justice (I prefer this formulation of the principle, as opposed to the use of the term “would”: see Timbercorp at [62] per Anderson J and the cases cited therein, as opposed to the different formulation adopted by Beach J in Dealer Support Services at [94], upon which the Jawoyn Claim applicant relied, but I would regard even that higher standard to have been met in the circumstances here).
…
(Emphasis added)
38Additionally, we refer to and adopt that which was said by Thomas J in a New Zealand case, Kooky Garments Ltd v Charlton [1994] 1 NZLR 587 at 590 where, in commenting on the role of legal practitioners as officers of the Court, his Honour stated:
In such cases, apart altogether from the position of the client, the Court is not receiving the assistance of counsel who are observably independent. Independence is a function of counsel. The Court is entitled to assume that solicitors and counsel appearing before it possess that independence. Solicitors not only owe a duty to their clients to do the best for them but also owe an overriding duty to the Court. The same overriding duty is owed by counsel who have been granted a right of audience to appear in this Court. As part of their professional responsibility, therefore, solicitors and counsel must ensure that they do not appear in a matter in which they have an actual or potential conflict of interest or where, by reason of their relationship with their client, their professional independence can be called in question.
39Significantly, that conflict of interest can arise where the personal or reputational interest of the legal practitioner is at stake in the proceedings. In that respect, in Mitchell v Burell [2008] NSWSC 772, Brereton J stated that:
20. … [The] line is crossed only when the solicitor has a personal stake in the outcome of the proceedings or in their conduct, beyond the recovery of proper fees for acting, albeit that the relevant stake may not necessarily be financial, but involves the personal or reputational interest of the solicitor, as will be the case if his or her conduct and integrity come under attack and review in the proceedings. The presence of such circumstances will be a strong indication that the interests of justice – which in this field involve clients being represented by independent and objective lawyers unfettered by concerns about their own interests – require the lawyer to be restrained from continuing to act.
Justice Brereton in the Supreme Court of New South Wales in Kallinicos v Hunt (2005) 64 NSWLR 561 at [76] enunciated the following principles, which the Court believes are not inconsistent with the preferred test in the Full Court’s decision in Charisteas:
[76] The foregoing authorities establish the following:
•During the subsistence of a retainer, where the court’s intervention to restrain a solicitor from acting for another is sought by an existing client of the solicitor, the foundation of the court's jurisdiction is the fiduciary obligation of a solicitor, and the inescapable conflict of duty which is inherent in the situation of acting for clients with competing interests (Prince Jefri Bolkiah).
•Once the retainer is at an end, however, the court’s jurisdiction is not based on any conflict of duty or interest, but on the protection of the confidences of the former client (unless there is no real risk of disclosure) (Prince Jefri Bolkiah).
•After termination of the retainer, there is no continuing (equitable or contractual) duty of loyalty to provide a basis for the court's intervention, such duty having come to an end with the retainer (Prince Jefri Bolkiah; Belan v Casey; PhotoCure ASA; British American Tobacco Australia Services Ltd; Asia Pacific Telecommunications Ltd; contra Spincode Pty Ltd; McVeigh; Sent).
•However, the court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice (Everingham v Ontario; Black v Taylor; Grimwade v Meagher; Newman v Phillips Fox; Mitchell v Pattern Holdings; Spincode Pty Ltd; Holborow; Williamson v Nilant; Bowen v Stott; Law Society v Holt). Prince Jefri Bolkiah does not address this jurisdiction at all. Belan v Casey and British American Tobacco Australia Services Ltd are not to be read as supposing that Prince Jefri Bolkiah excludes it. Asia Pacific Telecommunications Ltd appears to acknowledge its continued existence.
•The test to be applied in this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice (Everingham v Ontario; Black v Taylor; Grimwade v Meagher; Holborow; Bowen v Stott; Asia Pacific Telecommunications Ltd).
•The jurisdiction is to be regarded as exceptional and is to be exercised with caution (Black v Taylor; Grimwade v Meagher; Bowen v Stott).
•Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause (Black v Taylor; Grimwade v Meagher; Williamson v Nilant; Bowen v Stott).
•The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief (Black v Taylor; Bowen v Stott).
Section 247A(1) of the Corporations Act provides as follows:
247A Order for inspection of books of company or registered scheme
(1)On application by a member of a company or registered scheme, the Court may make an order:
(a) authorising the applicant to inspect books of the company or scheme; or
(b) authorising another person (whether a member or not) to inspect books of the company or scheme on the applicant’s behalf.
The Court may only make the order if it is satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose.
The terms “good faith” and “proper purpose” are not defined in the Corporations Act however, authorities frequently describe the threshold to establish the necessary good faith and proper purpose as being the existence of a “case for investigation”: Rasley (Singapore) Pte Ltd v Financial & Energy Exchange Ltd [2020] FCA 1462 (“Rasley”) at [27]; Intercapital Holdings Ltd v MEH Ltd (1988) 13 ACLR 595 at 602; Mesa Minerals Ltd v Mighty River International Ltd (2016) 241 FCR 241 (“Mesa Minerals”) at [26] and [54].
The above expression is used to emphasise that the Court must be satisfied that there is an objective basis for its intervention in order to exercise its discretion to grant access under s 247A of the Corporations Act: Enares Pty Ltd v Nimble Money Ltd (2021) 158 ACSR 451 (“Enares”) at [42]; Mesa Minerals at [26]; Praetorin Pty Ltd v TZ Ltd (2009) 76 ACSR 236 at [39]. An applicant must demonstrate more than mere curiosity or a general suspicion of a company’s management and must be able to “articulate a basis on which it might be found that illegal, improper or otherwise undesirable conduct has occurred”: Rasley at [28].
The Full Court in Mesa Minerals at [22] summarised additional principles to be considered, drawing on the decisions of Debelle J in Acehill Investments Pty Ltd v Incitec Ltd [2002] SASC 344 at [29] and Gordon J in Hanks v Admiralty Resources NL [2011] FCA 891 at [32], as follows:
(1) The stipulation that an application be made in good faith and for a proper purpose is a composite notion rather than two distinct requirements: Knightswood Nominees Pty Ltd v Sherwin Pastoral Company Ltd (1989) 15 ACLR 151 (Knightswood Nominees) at 155-157. That is to say, as Brooking J put it in Knightswood at 156:
[T]he reference to good faith colours and so reinforces the requirement of proper purpose. Acting in good faith and inspecting for a proper purpose means acting and inspecting for a bona fide proper purpose. It is as if the case was one of hendiadys.
(2) Good faith and proper purpose must be proved objectively: Acehill, citing Barrack Mines Ltd v Grants Patch Mining Ltd [1988] 1 Qd R 606 (Full Court) (Barrack Mines Appeal) and Knightswood. See also the discussion in Mantziaris C, “The member’s right to inspect the company books: Corporations Act, s 247A” (2009) 83 ALJ 621 at 628-629.
(3) “Proper purpose” means a purpose connected with the proper exercise of the rights of a shareholder as shareholder and not, for example, as a litigant in proceedings against the company or as a bidder under a takeover scheme: CescastlePty Ltd v Renak Holdings Ltd (1991) 6 ACSR 115 (Cescastle) at 117-118.
(4) The onus of proof is on the applicant: Quinlan v Vital Technology Australia Ltd (1987) 5 ACLC 389 (Quinlan) at 393.
(5) An applicant who has a significant holding and who has been a shareholder for “some considerable time” will more easily discharge the onus than one who has recently acquired a token holding: Quinlan at 393.
(6) It is not necessary that the applicant show that its interests are different to those of other shareholders: Yara Australia Pty Ltd v Burrup Holdings Ltd (2010) 80 ACSR 641 at [116].
(7) Nor is it necessary that the applicant have sufficient evidence to bring or make out an action (Praetorin Pty Ltd v TZ Ltd (2009) 76 ACSR 236 (Praetorin) at [40]); it is enough that the issue raised by the applicant is “substantive and not fanciful”, not “artificial, specious or contrived”: Merim Pty Ltd v Style Ltd (2009) 255 ALR 63 (Style) at [66]-[67].
(8) Pursuing a reasonable suspicion of breach of duty is a proper purpose: McNeill v Hearing and Balance Centre Pty Ltd [2007] NSWSC 942 at [17] citing Barrack Mines Ltd v Grants Patch Mining Ltd (1987) 12 ACLR 357 and the judgment on the unsuccessful appeal: Barrack Mines Appeal.
(9) Provided that the applicant’s primary or dominant purpose is a proper one, it is not to the point that an inspection might benefit the applicant for some other purpose: Unity APA Ltd v Humes Ltd (No 2) [1987] VR 474 (Humes) at 480; Barrack Mines Appeal at 615; Cescastle at 117-118.
(10) Applicants do not necessarily lack a proper purpose merely because they are hostile to other directors: Humes at 480.
(11) Neither the fact that an applicant may have had sufficient information earlier nor the fact that an applicant may have other means of obtaining the information is detrimental to an application under the section: McNeill at [23]-[25].
(12) The procedure under s 247A is not intended to be as wide-ranging as discovery so that the general rule is that inspection will be limited to such documents as evidence the results of board decisions, rather than all board papers leading to decisions, but there may be occasions when it is proper to permit inspection of board papers: Acehill at [31].
(13) The Court has a residual discretion whether to order inspection: Humes at 481.
Finally, Cheeseman J in Enares at [53]–[54] explained that there are both subjective and objective considerations in the analysis of whether the Court’s power is enlivened under s 247A of the Corporations Act:
[53]… The court must ascertain as a matter of fact the applicant’s actual, that is, its subjective purpose. If the respondent wishes to challenge whether the applicant’s stated purpose is in fact its purpose or dominant purpose then it is necessary for the respondent to challenge the applicant in cross examination: Mighty River International Limited v Mesa Minerals Limited [2015] FCA 462 at [45] (Barker J); In the matter of Combined Projects (Arncliffe) Pty Ltd [2018] NSWSC 649 at [18] (Leeming JA); Rasley at [86] - [87]; Re Style at 79 [57].
[54]The applicant’s subjective purpose is then assessed to ascertain whether objectively it is a proper purpose within s 247A of the Act: Acehill at [29(1)] applied in Hanks at [31] and Mighty River FC at [22(2)]. The applicant’s subjective view is relevant to, but will not determine, the outcome of that assessment: see e.g. Praetorin at 254 [89] - [93], Smartec at 475 [55] - [58]; Rasley at [36]. I note in this respect the observations in Rasley of Jackson J at [24]:
It is clear that the words 'proper purpose' mean a purpose reasonably connected with the proper exercise of the rights of a shareholder as a shareholder, as opposed to a purpose connected with some other interest, such as an interest as a bidder under a takeover scheme, or as a litigant in proceedings against the company: Knightswood Nominees at 156-157; Cescastle Pty Ltd v Renak Holdings Ltd (1991) 6 ACSR 115 at 118; and Hanks v Admiralty Resources NL [2011] FCA 891; (2011) 85 ACSR 101 at [32(3)]. In contrast, a purpose which is unrelated to the applicant's status as a shareholder (for example idle curiosity), inherently improper (for example harassment or blackmail), or both (for example sharing confidential information with a competitor of the company) would not establish good faith and proper purpose: see Knightswood Nominees at 156. However, it has been observed that in this context, 'improper' means simply a purpose for which the courts would not extend assistance in an application under the section: Barrack Mines at 613 (Andrews CJ, describing on appeal with apparent approval the view of the trial judge).
Regarding Harman undertakings, it was held by the House of Lords in Harman at 304 that:
…an order for production of documents to a solicitor on behalf of a party to civil litigation is made upon the implied undertaking given by the solicitor personally to the court (of which he is an officer) that he himself will not use or allow the documents or copies of them to be used for any collateral or ulterior purpose of his own, his client or anyone else; and any breach of that implied undertaking is a contempt of court by the solicitor himself.
The principle was described by the High Court of Australia in Hearne v Street (2008) 235 CLR 125 (“Hearne”) at [96] as follows:
96.Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence…
(Footnotes omitted)
Schedule 1 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) sets out a comprehensive scheme of pre-action procedures. These are reproduced in the first schedule to these reasons. Pre-action procedures require prospective parties to genuinely try and resolve their dispute before commencing proceedings and their aim is to encourage early and full disclosure, explore possibilities for resolution and, where a dispute cannot be resolved, to narrow the issues that require a decision by the Court. This should assist in resolving disputes more quickly and controlling costs. Any person who is considering filing an application to commence a proceeding must, before filing the application, begin completing the pre-action procedures (Sch 1(3)(1) of the Rules). The disclosure obligations clearly included the documents sought in the wife’s s 247A application.
MATERIAL BEFORE THE COURT
In support of his case, the husband relies upon the following material:
(a)Amended Initiating Application filed 12 December 2023;
(b)His affidavit filed 8 September 2023;
(c)His affidavit filed 22 September 2023;
(d)Affidavit of Mr G filed 14 December 2023; and
(e)Case Outline filed 15 December 2023.
In support of her case, the wife relies upon the following material:
(a)Originating Application filed 31 August 2023;
(b)Her affidavit filed 31 August 2023;
(c)Affidavit of Ms H filed 1 November 2023; and
(d)Written submissions filed 12 December 2023.
In support of their case, B Pty Ltd relies upon the following documents:
(a)Response to an Application in a Proceeding filed 13 December 2023;
(b)Affidavit of Mr G filed 14 December 2023; and
(c)Case Outline received 18 December 2023.
THE FIRST ISSUE: SHOULD THE WIFE AND HER SOLICITOR BE RESTRAINED IN THE TERMS SOUGHT BY THE HUSBAND?
The Court is satisfied that pursuant to its inherent and supervisory jurisdiction as identified by the Full Court of the Family Court in Charisteas at [37] it can make the orders sought restraining a law firm and its principal, neither of whom are joined to the proceedings. The Court acknowledges that the point was not taken by the wife’s solicitors and its principal, probably because the Court’s jurisdiction and power was self-evident.
The answer to this question depends on whether the evidence establishes that the wife’s lawyers would, because of representing the wife, gain access to confidential information which could provide to her lawyers an unfair advantage in litigation against the husband and/or his business, on behalf of other clients of the wife’s lawyers? Here, the focus is on the disadvantage that could be experienced by the husband in the circumstances.
Another issue might also arise in this case: would the wife’s lawyers be placed in a position of conflict of interest and duty as between the wife, and their other clients with claims or potential claims against the husband and/or his business. Here, the focus is on the disadvantage that could be experienced by the wife in the circumstances. Curiously this is not a point taken in her case.
Underlying the aforementioned potential conflicts of interest and duty to the wife, to the husband, and, indeed, potentially to other clients of the practice, is the lawyers’ paramount duty to the Court.
If a fair-minded, reasonably informed member of the public might conclude that the proper administration of justice requires a restraint, then the lawyer for the wife and his firm could be restrained from representing her in the interests of the protection of the integrity of the judicial process and the appearance of justice.
The present focus, therefore, is the protection of the integrity of the judicial process. This concept has been described by Justice Mandi at 450 in Grimwade citing Richardson J in Black v. Taylor [1993] 3 N.Z.L.R. 403 who stated at 408–409 that “[t]he integrity of our system of justice” depends on meeting certain standards such as the right to a fair hearing (including disputes being settled in a “fair, open and even-handed way”) and justice not only being done but being “manifestly and undoubtedly” seen to be done. Justice Mandi goes on to state at 451–452 that “[t]he legitimacy of judicial decisions depends in large part on the observance of the standards of procedural justice” and “[t]hat integrity is undermined if solicitors or counsel do not possess the objectivity and independence which their professional responsibilities and obligations to the Court require of them”.
There is no evidence before the Court of a proposal on behalf of the wife’s lawyers to create information barriers within the firm. The contention made on behalf of the husband that this would be quite impracticable was not challenged.
The starting point is to consider the evidence of Mr G as contained in his affidavit filed 15 December 2023. He is a professional employed in the husband’s business and conducts and/or supervises the type of work to which he deposes in his affidavit. He identifies eight current or likely conflicts of interest that will arise if the restraining orders are not made. The Court needs only to identify the facts justifying the making of the orders sought but will briefly comment on the facts that do not justify the Court’s intervention.
The totality of the material before the Court creates the strong impression that both C Lawyers, the wife’s lawyers practice, and B Pty Ltd, the husband’s business, are busy businesses operating within a relatively small but prosperous geographical area that is (relevantly) serviced by multiple government agencies. It is by no means surprising that the respective businesses would represent clients who have claims against the other. It might also not be surprising that the heads of each business are parties to litigation, even against the other, as in the present case. The totality of the material before the Court again creates the strong impression that the relationship between the principals of the wife’s lawyers practice, and the husband, is not as constructive as it might otherwise be. Had it been more constructive, the Court hypothesises, this litigation might have been avoided.
In these circumstances, the husband is, perhaps understandably, concerned about how confidential financial information about his business, required to be disclosed to the wife for the purposes of litigation between them, might be used by the wife’s lawyer (advertently or inadvertently) for other purposes relating to other unrelated litigation such that this would be unfairly prejudicial to him. As it turns out, the Court is not satisfied on the material before it that that is reasonably likely to occur. What emerges from the material before the Court, however, is that the wife’s lawyer is placed in what appears to be an irreconcilable conflict of interest and duty as between the wife as his client, and other clients who have litigation against the husband’s clients. This undermines the integrity of the judicial process – a conclusion that is reached even in the absence of any expression of concern by the wife herself.
The Court is not satisfied that the work conducted by both businesses on behalf of their own clients against the clients of the other business creates any difficulty insofar as it relates to the husband’s disclosure of financial information relating to his business. For example, the Court cannot foresee how the husband is prejudiced in any way in the work he conducts on behalf of his clients by the disclosure to the wife of the work in progress in his business, and whether the basis of contracting work is contingent or otherwise. The husband’s contention is dependent on two factors, neither of which are established to the satisfaction of the Court. Firstly, that contrary to the express duty imposed on the wife’s lawyer by r 11.4 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015, C Lawyers would use information acquired in the context of one matter, in an unrelated matter. Secondly, that such confidential information is somehow relevant to the issues in dispute.
Of much greater concern to the Court, however, is the material before the Court suggesting that the wife’s lawyer represents two former employees of the business conducted by the husband who have claims against the business, half of the shares of which are held by the wife herself. For present purposes, the status of such claims is irrelevant. It matters not whether the claims are presently litigated or not.
The claim by one former employee seems to have three bases: unpaid commission of $250,000; an unspecified and unparticularised personal injury claim for $200,000, which includes allegations of personal violence perpetrated by the husband; an employment entitlements claim; and a payment in connection with a potential defamation action. The claim by the other former employee seems to be based on unpaid commissions. The evidence in the husband’s case contends that these claims are not covered by insurance. Thus, the claims are likely to be treated for valuation purposes as contingent liabilities. The wife’s own evidence suggests that she may be a witness in at least one of these claims. It is noted that the wife contends that there is only one matter in which C Lawyers represents a client against the husband.
The dilemma that is created by the above scenario is self-evident. A reasonable inference is that in the wife’s claim against the husband she will seek to maximise the value of the business and its shares. The effect of the claim by the other parties against the husband is likely to reduce or minimise the value of the business and its shares. The complexity of the wife potentially giving evidence in support of the latter may well be something that she needs to carefully consider. The situation in which the wife’s lawyer will find himself is untenable. His duties to the wife on the one hand, and to the other claimants on the other, cannot be reconciled. Respectfully, this should have been obvious to him before this present application was brought before the Court.
THE SECOND ISSUE: SHOULD THE FURTHER ORDERS SOUGHT AGAINST THE WIFE BE MADE?
The husband seeks for the wife to be restrained from providing, or making available to view, any information in relation to B Pty Ltd or the husband to C Lawyers or any of their employees, as well as from disseminating or communicating to anyone (other than her legal representatives or an agreed mediator or expert valuer) any confidential information that she has received or will receive through the financial disclosure process as it relates to the husband or B Pty Ltd.
It is the Court’s view that there is a reasonable basis for concluding that this injunction is warranted. The evidence shows that, at the very least, the husband’s solicitors provided the wife’s solicitors with two of B Pty Ltd’s financial statements for the years ending 2020 and 2021 as part of the pre-action procedures contained in the Rules. The wife then published these documents in the FCA proceedings by annexing that material to her affidavit. This was in breach of her Harman undertaking, which is acknowledged in her Originating Process where she seeks for the Harman principles to be “relaxed”. Although, the Court notes that the wife stated at paragraph 26 of her affidavit that she considered the Harman undertaking and believed she was “able to disclose and annex the Statements” because there were no family law proceedings on foot (preventing her from making an application in the FCFCOA to “relax” the Harman undertaking); the matter involves related parties (the husband as sole director of B Pty Ltd, and herself); she was a director of B Pty Ltd for most of 2020 and had access to its financial affairs; and as a shareholder at all material times, she may be granted access to the financial statements by the Court if she has a proper purpose and the request is made in good faith.
The wife’s belief that she was permitted to use the financial statements does not vindicate her action in breaching her Harman undertaking. Counsel for the husband rightly pointed out that permission to use those confidential documents should have been sought out first – a party cannot “do the deed and seek forgiveness”. The wife needed permission from the court where the documents arose, which in this case was the FCFCOA, before using those documents in the FCA proceedings. A further injunction is warranted to prevent the wife from taking a similar course of action in the future.
Counsel for the wife submitted that the Harman rule does not apply to the documents disclosed by the wife in the FCA by reason of r 6.04(2)(c) of the Rules. This rule states that:
6.04 Use of documents
…
(2) However:
…
(c) this rule does not affect the right of a party to use a document or to disclose its contents if that party has a common interest in the document with the party who has possession or control of the document.
The Court rejects this submission. The alleged common interest seems only to have been framed based on the husband and the wife’s equal shareholding in the company. The Court does not accept that this interest is sufficient for present purposes. There is no commonality of interest on the present facts. The husband’s interests in the FCFCOA property proceedings compete with the wife’s interests. The example previously referred to is apposite: it is in his interest to reduce the value of the shareholding, but in her interest to increase it. Whatever common interests they may have had before separation has disappeared. Rule 6.04(2)(c) is not enlivened in the circumstances. In any event, the Court notes the inconsistency between the present application in this Court to be relieved from the Harman undertaking, and purported reliance on r 6.04(2)(c).
THE THIRD ISSUE: SHOULD AN ORDER BE MADE UNDER S 247A OF THE CORPORATIONS ACT
The wife seeks an order under s 247A of the Corporations Act. The relevant law is outlined at [17]–[21] of these reasons for judgment. A preliminary observation needs to be made. The granting of such an order is discretionary. This discretion will be exercised having regard to the facts and circumstances of this case. A highly relevant fact is the known contemplation or reasonable expectation of proceedings under the Family Law Act 1975 (Cth) (“the Act”), and what the Court will consider to be an adequate procedure and remedy under the Act and the Rules. It would be contrary to public policy if in cases such as the present a remedy under the Corporations Act is routinely invoked when other less litigious and costly remedies are available under the Act. The fact that the FCA transferred the proceedings to this Court is relevant.
The wife and her lawyers were clearly aware of the family law issues between the parties before the commencement of proceedings in the FCA under s 247A of the Corporations Act, and the pre-action procedures referred to above were already set in motion. In those circumstances, the s 247A proceedings were, in this case, an abuse of process. This Court is conscious of the statement by Hammerschlag J in McNeill v Hearing and Balance Centre Pty Ltd [2007] NSWSC 942 at [24] that:
It is also not the law, in my view, that because an applicant may have the means of obtaining information elsewhere, it is not acting in good faith, or seeking inspection otherwise than for a proper purpose.
Good faith is determined not just by the availability of another means of obtaining information, but whether that other means should have been adopted in the circumstances of a particular case.
In the often cited authority of State Bank of New South Wales Ltd v Stenhouse Ltd & Ors (1997) Aust Torts Reports 81–423, Giles CJ (Supreme Court of NSW Commercial Division) provides a helpful review of the authorities relating to abuse of process. In summary, a proceeding may be an abuse of process where:
(1)The proceedings are unreasonably oppressive and unfair to the other party;
(2)The proceedings will bring the administration of justice into disrepute; and/or
(3)The party seeks to re-litigate an issue that has already been determined in previous proceedings.
The present application brings the administration of justice into disrepute. It was unnecessary, unreasonable, and unfair to the husband in circumstances where he was already obligated to engage in early full and frank disclosure through the pre-action procedures in the FCFCOA. The difficult conflicted position of the wife’s lawyer, one that should have been obvious to him as articulated above, merely exacerbates this.
Counsel for the interested third party in this matter, B Pty Ltd, questions the appropriateness of the wife’s s 247A application on its own merits, submitting that the wife was not acting with a proper purpose and lacked good faith. It is unnecessary to determine this given the Court’s finding that the application was an abuse of process.
DETERMINATION
The Court will adopt the orders proposed by the husband in his Case Outline filed 15 December 2023.
ORDERS MADE
C Lawyers and Mr D will be restrained from continuing to act for the wife in these proceedings. The wife will be restrained from providing, or making available to view, any information in relation to B Pty Ltd or the husband to C Lawyers or any person employed by C Lawyers. She will also be restrained from disseminating or communicating to anyone (other than her legal representatives, and agreed mediator or expert valuer) any confidential information she has or will receive through the financial disclosure process as it relates to the husband or B Pty Ltd. Within 14 days of the date of these orders the wife shall provide to the husband a list of all documents that she has either provided or shown to C Lawyers and an indication in writing of when the documents were provided or shown. Within 14 days of the date of these orders the wife shall file and serve an updated Financial Statement. Within 28 days of the date of these orders the parties shall exchange any outstanding disclosure documents. In the event that a party notifies chambers of an intention to seek costs arising from this application, directions will be made for such a costs application to proceed by way of written submissions.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli. Associate:
Dated: 15 February 2024
SCHEDULE ONE
1 General
(1) Each prospective party to a proceeding in the Federal Circuit and Family Court of Australia must make a genuine effort to resolve the dispute before filing an application to start proceedings by following the pre-action procedures outlined in clause 3 of this Part.
(2) There may be serious consequences for non-compliance with the pre-action procedures, including costs penalties or a stay of proceedings pending compliance.
(3) The circumstances in which the court may accept that it was not possible or appropriate for a party to follow the pre-action procedures are outlined in subrule 4.01(2).
(4) The objectives of the pre-action procedures are as follows:
(a) to encourage early and full disclosure in appropriate proceedings by the exchange of information and documents about the prospective proceeding;
(b) to provide parties with a process to avoid legal action by reaching a settlement of the dispute before starting a proceeding;
(c) to provide parties with a procedure to resolve the proceeding quickly and limit costs;
(d) to ensure the efficient management of proceedings in the court, if proceedings become necessary;
(e) to encourage parties, if proceedings become necessary, to seek only those orders that are reasonably achievable on the evidence;
(f) to give effect to the overarching purpose of the family law practice and procedure provisions as provided by section 67 of the Federal Circuit and Family Court of Australia Act 2021.
(5) At all stages during the pre-action procedures and, if a proceeding is started, during the conduct of the proceedings, the parties must have regard to the following:
(a) the best interests of any child, including the need to protect and safeguard the child against risk or harm;
(b) facilitating a meaningful relationship between a parent and the child, if appropriate, and the benefits of effective co-parenting;
(c) the potential damage to a child involved in a dispute between the parents, particularly if the child is encouraged to take sides or take part in the dispute;
(d) the best way of exploring options for settlement, identifying the issues as soon as possible, and seeking resolution of them;
(e) the need to avoid protracted, unnecessary, hostile and inflammatory exchanges;
(f) the impact of correspondence on the intended reader (in particular, on the parties);
(g) the need to seek only orders that are reasonably achievable on the evidence and that are consistent with the current law;
(h) the principle of proportionality and the need to control costs because it is unacceptable for the costs of any proceeding to be disproportionate to the financial value of the subject matter of the dispute;
(i) the duty to make full and frank disclosure of all material facts, documents and other information relevant to the dispute.
Note The duty of disclosure extends to the requirement to disclose any significant changes (see clause 4 of this Part).
(6) Parties must not:
(a) use the pre-action procedures for an improper purpose (for example, to harass the other party or cause unnecessary cost or delay); or
(b) in correspondence, raise irrelevant issues or issues that may cause the other party to adopt an entrenched, polarised or hostile position.
(7) The court expects parties to take a sensible and responsible approach to the pre-action procedures.
(8) The parties are not expected to continue to follow the pre-action procedures if it is not safe to do so, or if reasonable attempts to follow the pre-action procedures have not achieved a satisfactory solution.
(9) At the time of filing an application to start a proceeding or a response to that application, a party must file a Genuine Steps Certificate outlining:
(a) both:
(i) the party’s compliance with the pre-action procedures; and
(ii) the genuine steps taken by the party to resolve the dispute; or
(b) the basis of any claim for an exemption from compliance with either or both the requirements referred to in subparagraphs (a)(i) and (ii).
2 Compliance
(1) The court regards the requirements set out in these pre-action procedures as the standard and appropriate approach for a person to take before filing an application in a court.
(2) If a proceeding is subsequently started, the court may consider whether these requirements have been met and, if not, any consequences for non-compliance.
(3) The court may take into account compliance and non-compliance with the pre-action procedures when it is making orders about case management and considering orders for costs (see subrule 1.33(2) and paragraphs 1.34(2)(b) and 12.15(1)(b)).
(4) Unreasonable non-compliance may result in the court staying the proceeding pending compliance, or ordering the non-complying party to pay all or part of the costs of the other party or parties in the proceeding.
(5) In situations of non-compliance, the court may ensure that the complying party is in no worse position than the party would have been in had the pre-action procedures been complied with.
Note: Examples of non-compliance with the pre-action procedures include the following:
(a) not sending a written notice of proposed application;
(b) not providing sufficient information or documents to the other party;
(c) not following a procedure required by the procedures;
(d) not responding appropriately within the nominated time to the written notice of proposed application;
(e) not responding appropriately within a reasonable time to any reasonable request for information, documents or other requirement of the procedures.
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